Is Amazon's Newest 5% Credit Card Worth The Hype?

Consumers have been benefitting from a cash back war between credit card issuers that has seen cash back rates continue to climb. When Discover launched the first cash back card in the 1980s, a 1% return was considered innovative and generous. Not any longer.

If you want to earn 5% cash back on spending at Target, just open their popular Red credit card. Amazon Prime members could earn 5% cash back with a store card issued by Synchrony. And if you shop for the best rewards credit cards online at sites like MagnifyMoney or NerdWallet, you can find cards that pay as much as 6% on groceries, 5% on fuel and offer generous sign-on bonuses.

2017 has just begun, but already there is a new product launch promising even better rewards. This week, Amazon launched the Amazon Prime Rewards Visa Signature Card, issued by Chase. The big headline is unlimited 5% back on spending at Amazon.com. Although Synchrony already offers 5% to Prime members, the new card is different in a number of very important ways:

Whereas Synchrony's card is a store card that can only be used at Amazon.com, the new card is a Visa that can be used anywhere Visa is accepted.

The new card offers rewards on spending outside of Amazon. The unlimited 2% back on restaurants, gas stations and drug stores is a very competitive return. There is also 1% on all other spending (the weakest part of the card).

There is a sign-on bonus of $70. But unlike most sign-on bonuses, you will get it right away. You do not need to spend a certain amount of money in order to earn the bonus.

It is easy to use the points. When you are checking out on the Amazon website, you will see the points that you have earned and can immediately apply them to your balance. Equally, you can use the Chase website to convert the points into cash back. With Synchrony, you had to wait for a statement credit.

This card has no annual fee, no foreign transaction fees and has been called "an obvious choice for Amazon Prime members."

What Are The Risks?

The credit card industry has fully recovered from the 2008 financial crisis. Bonus offers and rewards schemes are becoming richer, more people can get approved and banks are once again spending on product development and marketing. For responsible consumers, this is great news.

People just need to beware the two risks of more widely available credit:

Interest rates on rewards credit cards are higher than credit cards without rewards. If you need to borrow money, it is better to apply for a low rate credit card without rewards or consider a loan. Accidental borrowing can be expensive, and you could quickly end up spending more interest than you earn in cash back.

Most credit cards now offer tools to help you control your spending, including text alerts, email alerts and easy mobile banking. If you have a plan and self-control, the opportunity to save with these increasingly lucrative credit cards is meaningful.